If you’re overweight, here’s another reason to lose the weight.
Until now, large companies have employed incentives, such as a wellness program of company gym and healthy food in the company cafeteria, to encourage their employees to be health conscious and so reduce the company’s healthcare costs.
But with ever-rising healthcare costs that are exacerbated by Obamacare, employers are moving from the carrot to the stick. More and more, companies are turning to a “fat penalty” or “fat tax” to get overweight employees to shoulder more of their healthcare expenses.
In an article for subscribers only, the Wall St. Journal (via ZeroHedge) reports that corporate spending on health care is expected to reach an average of $12,136 per employee this year, according to a study by the consultant firm Towers Watson.
Typically, however, 20% of a company’s workforce drives 80% of health-care costs, and roughly 70% of health-care costs are related to chronic conditions brought on by lifestyle choices, such as overeating or sedentary behavior.
In addition to higher healthcare costs, obese or overweight workers also cost their employers in lost productivity. A 2011 Gallup survey estimated obese or overweight full-time U.S. workers miss an additional 450 million days of work each year, compared with healthy workers, resulting in more than $153 billion in lost productivity.
So companies are doing something about it, since the carrot approach hasn’t really worked.
A recent study of 800 mid- to large-size firms by human-resources consultancy Aon Hewitt found that as many as 6 in 10 employers say they plan to impose penalties in the next few years on employees who don’t take action to improve their health. According to another study, by the National Business Group on Health and Towers Watson, the share of employers who plan to impose penalties is likely to double to 36% in 2014.
Workers will be penalized for a range of conditions, including thick waistlines, high cholesterol and high blood pressure — all proxies for obesity about which companies can’t say outright. Companies are also demanding that employees share personal-health information, such as body-mass index, weight and blood-sugar level, or face higher premiums or deductibles.
Current law permits companies to use health-related rewards or penalties as long as the amount doesn’t exceed 20% of the cost of the employee’s health coverage.
Employee-rights advocates say the penalties are akin to “legal discrimination.” While companies are calling them wellness incentives, the penalties are essentially salary cuts by a different name, says Lew Maltby, president of Princeton, N.J.-based National Workrights Institute, a nonprofit advocacy group for employee rights in the workplace. “It means millions of people are getting their pay cut for no legitimate reason.”
But corporate leaders say they can’t lower health-care costs without changing workers’ habits, and they cite the findings of behavioral economists showing that people respond more effectively to potential losses, such as penalties, than expected gains, such as rewards.
An example is Honeywell International Inc. that recently introduced a $1,000 penalty—deducted from health-savings accounts—for workers who elect to get certain procedures such as knee and hip replacement and back surgery without seeking more input. The company had offered $500 for participating in a program that provides access to data and additional opinions for workers considering surgery, but less than 20% of the staff joined up. Since it flipped the incentive to a penalty, the company says, enrollment has been above 90%.
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